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Kajal Goyal 11-Jan-2022

Balance of Power (BOP)

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It is an oscillator that measures the strength of the buying and selling pressure. The Balance of Power indicator is a technical analysis tool. It constantly measures the balance between the market power of buyers and sellers. This helps traders determine the prevailing mood at the moment. Traders can use this indicator to: When the indicator is positive, the bulls are in control; and sellers dominate when the indicator is negative. A reading near the zero line indicates a balance between the two and may indicate a trend reversal.

 

History

 

The Balance of Power (BOP) indicator was developed by Igor Livshin and later presented to the public through Stocks and Commodities magazine in 2001. The BOP measures price trends by measuring the strength of buyers and sellers in the market and determining what prices reach extreme ups and downs.

 

Calculations

 

To calculate the force ratio, use the following formula:

 

Balance of Power = (Close Price - Open Price) / (High Price - Low Price)

 

Takeaway

 

The balance of power (BOP) is known to oscillate around the zero centerlines, which ranges from -1 to +1. A positive BOP indicates dominance in the buyer's market, while a negative BOP indicates dominance in the seller's market. When the BOP is zero, it shows that the buyer and seller are the same in today's market.

 

Identifying Trends

An uptrend is indicated by an ascending BOP line and a descending trend by a descending BOP line. The transition from the zero line confirms the change in trend.

 

Price Differences

This is a negative spread if new price levels are reached, but not BOPs; if the price rises but the BoP does not, the price difference is positive. These differences can predict a change in trend.

 

Terms and conditions Overbought / Oversold

Chartists must look at historical levels of security that challenge them to determine what should be considered oversold/bought for that security. Once these stocks have been overbought/overbought for that security, look for declines beyond that.

 

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